By Tracy Schmidt, Vice President & General Manager of NCMIC Finance Corporation
If you sell a product or service, you probably accept credit cards. Here are ten things to know and consider when exploring merchant processing options.
- You’re going to pay for each transaction. Called an interchange fee, this fee is attached to each transaction and is the primary cost of accepting credit cards. It is a percentage of the transaction amount and is paid by you, through your merchant processor, to your customer’s issuing bank. Interchange fees are determined by the payment brands (Mastercard, Visa, etc.) and vary depending on the type of card (e.g. debit, credit, reward). Different card types carry different transaction risks and therefore fees vary. Some payment processing companies may bury these fees in other language or roll it up into other fees and call it something else, but the fact of the matter is, someone has to pay this fee. If companies claim to have no interchange fee, look at the fine print or ask your representative for the details.
- Do your homework on other fees. Besides interchange, there are other basic costs of processing that you’ll want to compare such as transaction rates, compliance fees (to protect you in the event of compromise or breaches) and equipment costs. If you’re comparing offers, make sure you understand all the fees as well as terms and conditions so you can make a knowledgeable decision. Skimming or skipping can cost you big money.
- Beware of cancellation penalties. Make sure you know what happens if you decide to cancel. Some terminal equipment leases as may require large penalties if you decide to cancel.
- Request terminals that can be upgraded. Reliable terminals should have the capability to be upgraded for the latest security and software updates.
- Contactless payment is a hot trend. For obvious reasons, touch-free has become very popular with both customers and merchants during the last couple of years. Being able to accept credit cards without a manual exchange is safer, faster and cleaner.
- PCI Compliance matters. Credit card associations require certain steps to protect consumers and keep their information safe. There are resources available to help you be compliant and keep your customers safe.
- You should receive your funds in two days or less. The industry standard is two business days, but depending on the company you choose it could be longer. Reliable companies will transfer funds as quickly as possible and not hold your money.
- Yes, you need to read your Merchant Agreements. These can be wordy. After all, it’s money transferring between card associations, financial institutions and bank accounts. That said, it’s important to review them to ensure you understand all the terms and conditions. Ask questions! We’ve talked to hundreds of people who are stuck in bad agreements because they didn’t review them closely. This mistake can be expensive.
- Be wary of offers that seem too good to be true. As with anything, if an enticement offer seems too good to be true, it often is. This is especially important when it comes to credit card processing. Unscrupulous providers may entice you with extremely low offers and rates, only to turn around later and raise them, or charge additional fees after you sign up. Also, be leery of companies presenting you with free terminal offers unless the offer is from a reliable source.
- Understand exactly who will be servicing your account. There are literally thousands of sources that will sell you credit card processing. You can buy through the internet, from banks, through ISO (Independent Sales Organizations) or directly from the processing company. Many banks and all ISOs sell the services offered by a processing company. Understanding who will ultimately be the organization servicing your account and providing support is very important as not all service is equal. Ultimately it comes down to who you trust to provide you with the best and most reliable service at a reasonable cost.
Whether you’re looking for your first system or thinking about a change, take the time you need to compare your options. Read the documentation and agreements. And then choose a company you know you can trust with such an integral part of your business.
To speak to a local expert, contact Tracy Schmidt at email@example.com
About Tracy Schmidt
Tracy is currently Vice President & General Manager of NCMIC Finance Corporation (NFC). He helped NFC start and build the company’s merchant credit card processing business in 2002 through a subsidiary company that was purchased outright in 2005 by NFC. Tracy has more than 30 years of experience working in the credit card industry.
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